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The High Costs of Controlling GST and VAT Evasion

Author

Listed:
  • Bahro A. Berhan

    (Department of Business, Sheridan College, Brampton, Canada
    Department of Economics, Queen's University, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

The GST is a value-added tax (VAT). Countries which impose a VAT are faced with problems and have proposed various solutions. North Cyprus and Bolivia, for example, refund some of the VAT paid on the purchases for which final consumers have obtained official receipts from sellers. In this article, the authors measure the compliance costs to taxpayers and the administration costs to the tax authorities in these two countries. Although similar schemes are not likely to be directly copied in Canada, the authors provide data to show how high compliance and administration costs can go when governments single-mindedly pursue the goal of controlling VAT evasion. The total VAT compliance and administration costs incurred by North Cyprus (in 2003) and Bolivia (in 2002) are estimated at, respectively, 1.50 and 1.55 times the total budgetary expenditures to administer the entire domestic tax system. In both countries, the compliance and administration costs of the VAT refund schemes amounted to more than the 5 percent of the total revenues collected by the VAT systems.

Suggested Citation

  • Bahro A. Berhan, 2005. "The High Costs of Controlling GST and VAT Evasion," Development Discussion Papers 2005-06, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:5518
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    Cited by:

    1. Giovanni Immordino & Francesco Flaviano Russo, 2014. "Taxing Cash to Fight Collaborative Tax Evasion?," CSEF Working Papers 351, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Immordino, Giovanni & Russo, Francesco Flaviano, 2018. "Cashless payments and tax evasion," European Journal of Political Economy, Elsevier, vol. 55(C), pages 36-43.
    3. Andreas Knabe & Ronnie Schöb, 2009. "Minimum Wage Incidence: The Case for Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(4), pages 403-441, December.

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